Asset allocation and location over the life cycle with investment-linked survival-contingent payouts

This paper shows how survival-contingent investment-linked payouts can enhance investor wellbeing in the context of a portfolio choice model which integrates uninsurable labor income and asymmetric mortality expectations. In exchange for illiquidity, these products provide the consumer with access to mutual-fund style portfolio choice, as well as the survival credit generated from pooling mortality risk. Our model generates optimal asset location patterns indicating how much to hold in liquid versus illiquid survival-contingent payouts over the lifetime, and also asset allocation paths, showing how to invest in stocks versus bonds. We show that the investor who moves her money out of liquid saving into survival-contingent assets gradually from middle age to retirement and beyond, will enhance her welfare by as much as 50%. The results are robust to the introduction of uninsurable consumption shocks in housing expenses, income flows during the worklife and retirement, sudden changes in health status, and medical expenses.     

From ability to pay to concepts of equal sacrifice

The ability-to-pay approach to taxation in Mill's tradition is given a rigorous treatment in a social choice theoretic framework. Generalized concepts of equal sacrifice are axiomatized making explicit use of the ability-to-pay principle. Extensive statements on progressivity are derived. However, there is no such axiomatized concept that implies non-excessive progressitivity irrespective of taxpayers' utility function.     

Monetary Policy Rules for a Small Open Economy

In this paper, the optimal choice of a monetary target is investigated for a small open economy that is subject to foreign monetary policy shocks. In contrast to large parts of the literature, pegging the exchange rate is never the best policy choice for the small open economy in our model. Instead, monetary targeting and, depending on the parameter combination, producer price index targeting come closest to the optimal policy rule in terms of welfare. Generally, the welfare performance of the simple targeting rules under consideration hinge critically on the degree of pass-through in the home economy and in the rest of the world.     

Collaborative innovation and policy support: the emergence of trilateral networks

ABSTRACT

The present article models the critical factors for a successful and evolutionarily stable National System of Innovation. We simulate a model, against the background of increasingly complex technologies, in a national process of agents’ interactions with social-dilemma characteristics. In particular, the articleinvestigates the emergence of a trilateral collaborative innovation alliance among ‘enterprise’, ‘university’ and ‘government’. We apply a tripartite evolutionary game with a replication process and explore the role and options of the public policy agent to support collaboration on innovation. We find that some policy mix, in particular, a combination of (1) public rewards for cooperation, (2) public punishment for non-cooperation and (3) settings of public cost controls and tax income from innovation, can promote broad and sustainable innovation alliances. For instance, threats of strong punishment, even with low public rewards for cooperation, may promote the formation of a collaborative innovation alliance. We run some sensitivity analyses of the results through parametric variation of two critical factors of the model, knowledge spillover and output elasticity of knowledge input. We find some qualifications for the velocity of the process.     

Fisheries Management Under Cyclical Population Dynamics

Cycles in environmental conditions (e.g., sea-surface temperature) directly impact fish growth. This paper extends the classical Gordon-Schaefer fishery model by replacing the constant growth rate with a cyclical growth rate. The optimal harvest rate is shown to fluctuate, but the cycle of the harvest rate lags the cycle of the biological growth function with the highest harvest rate occurring after biological conditions start to decline. Simulations contrast various fishing policies and illustrate the proclivity to crash a fishery if it is wrongfully managed as if there is a constant growth rate with i.i.d. environmental shocks. Finally, we show that small cyclical fluctuations in one species can result in large fluctuations in the optimal harvest rate of another species if the fish species are interlinked through predator-prey relationships.